China’s producer prices sink again in June in latest sign of struggling economic recovery

China’s annual producer deflation deepened in June while consumer prices were flat, official data showed Monday, underwhelming market expectations.

The data underscores the depth of the challenges that beset the world’s second-largest economy in reviving demand and revitalizing growth.

Monday’s data offers fresh evidence of slowing growth, suggesting easing monetary policy has been insufficient in reinvigorating and sustaining the country’s recovery from its strict “zero-Covid” curbs late last year.

Producer prices sank 5.4% in June from a year earlier and slipped 0.8% from a month ago, according to China’s National Bureau of Statistics. This was weaker than a Reuters poll that had expected a 5.0% annual decline, compared with the 4.6% annual decline in May.

Annual consumer price inflation was flat in June, underwhelming expectations for a 0.2% rise in a Reuters poll and weaker than the 0.2% rise in May. Monthly consumer price inflation in June was weaker 0.2%, weaker than expectations for flat growth and tracking the 0.2% decline in May.

Weak producer prices “could be attributed, in part, to a higher base for comparison, as global commodity prices were surging a year ago following Russia’s invasion of Ukraine,” Capital Economics’ Zhichun Huang said in a note Monday.

“PPI deflation is likely to ease somewhat in the second half of the year, partly because infrastructure spending should put a floor under commodity prices,” he added.

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